Target goes hunting in Silicon Valley, following Wal-Mart

SAN FRANCISCO – Target Corp said on Friday it opened a new San Francisco office to track down technology companies that can help the second-largest U.S. retailer grow its online commerce business.

Target's Technology Innovation Center is run by David Newman, an executive who spent six years at the online business of Wal-Mart Stores Inc , which has had a major presence in Silicon Valley for several years.

"Partnership is in our DNA and early-stage companies can sense that and are proving to be very willing to partner and co-develop," said Newman.

Many retailers are pouring money into new technology to help them catch up with Amazon.com Inc , which has become the world's largest retailer by grabbing market share from traditional bricks-and-mortar stores.

Mobile commerce, powered by smartphone-wielding shoppers, is a particular focus of retailers because this technology has the potential to revitalize in-store sales.

Target's San Francisco office will focus on "core commerce" initiatives, such as speeding up the company's website. However, it also aims to bring more digital shopping experiences into the retailer's physical stores through smartphones, Newman said.

One area Target is exploring is "augmented reality," which uses smartphone cameras to give shoppers a digital view of store aisles and show them related products, Newman said.

That technology is still a long way off, but Newman noted that Target is already working with eBay Inc and Google Inc , two Silicon Valley giants, on same-day delivery tests.

Target also recently began testing a service that allows its employees to order products online and pick them up in the retailer's stores. The company plans to roll this out to customers this Fall.

Wal-Mart's e-commerce offices, south of San Francisco, have churned out a slew of new online and mobile technology in recent years and these efforts might be showing early signs of success.

"The company seems to be gaining traction in several geographies with different technologies such as Scan & Go, Ship from Store and increased mobile capabilities," Robert Drbul, a retail analyst at Barclays, wrote in a note to investors on Thursday.